Click to EnlargeAfter reading Apple’s (AAPL) the earnings report and the transcript of the call with officials, I was more convinced than ever that the company faces a stiff downhill slide in smartphone market share to Android devices. It may not be fair, but it’s hard to compete against “free,” as Google (GOOG) charges device makers nothing for the operating system.
The only way you can beat free is with amazing innovation that makes people want to pay up for something special. Unless Apple comes up with something mind-blowing very soon — oh brother, not a watch! — this path to market share domination is going to close. And unfortunately as soon as you start losing market share in a big way, erosion gives way to collapse — and margins get crushed in the process.
In a couple of years, I sense that the Apple iOS smartphone ecosystem will be seen as something of a relic of the past, just like their Macs. Good products, fair prices, but niche items that do merit the sort of high earnings multiples that the company enjoyed in its heyday. The “creative destruction” cycle in technology is brutal, but it ends up being great for consumers (if not for investors).
The latest evidence of the demise of Apple’s innovative legacy came in my email inbox today, when I was invited to try the beta of iWork for iCloud. (See the screenshot of the email above.) At first I thought this was a joke, or spam, but it turns out that Apple is really trying to say that creating documents online is a brand-new idea. Who are they kidding? Google has had this for more than five years (Google Docs) — and even Microsoft (MSFT) finally got with the program with its Office 365 online docs product.
Could Apple really think that this is new and exciting? If so, it is a breathtaking admission of how far behind they are. I actually checked out the service, and it literally looks like a page out of 2005. It’s very depressing to see this once-great company wander around Silicon Valley like a headless body that has lost its soul. The shares need to close over $450 to break out, but don’t be surprised if they revisit the high $300s first. iFear that the iLights are on — but no one is iHome.
InvestorPlace advisor Jon Markman operates the investment firm Markman Capital Insight. He also writes a daily swing trading newsletter, Trader’s Advantage, which aims to capture profits of 15% to 40% and often as much as 100% to 200% in less than 90 days.
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